Technical View: Nifty forms ‘Spinning Top’; remain long with a stop below 10,028

The Nifty50 which started on a flat note gained momentum but remained volatile throughout the trade on Thursday and closed with marginal gains. It made a ‘Spinning Top’ kind of pattern on the daily charts for the second day in a row.

The index remained choppy for the most part of the trading session and finally closed with the marginal gains of 7 points at 10,086.60. It rose marginally to 10,126.50 but then witnessed selling pressure which took the index towards its intraday low of 10,070.35.

A Spinning Top candle is often regarded as a neutral pattern which suggests indecisiveness among both bulls as well as bears.

When a Spinning Top is formed in an uptrend, the one we are in right now, suggests that the buyers are losing conviction and a possible top could be in place, but it will still require confirmation.

The previous record high of 10,137 becomes an important level which bulls need to surpass in the coming sessions if they want to remain in control of D-Street. Traders are advised to remain cautious and maintain a strict stop loss below 10,028 for all long positions.

“It was a day of consolidation on the bourses as Nifty50 registered a Spinning Top kind of indecisive formation, for the second day in a row, after moving in a narrow range of around 50 points,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“This kind of indecisiveness on the part of bulls near the critical resistance point of 10,137 is a cause for concern. Hence, unless this resistance point is taken off in next trading session this rally may not get extended further there by paving the way for fresh leg of downside,” he said.

Mohammad advises traders to remain cautious with a tight of a stop below 10,028 levels. On the other hand, any breakout above 10137 levels shall extend this pull back rally up to 10205.

India VIX fell down by 2.47% at 11.47 and lower VIX below 12.50 is holding the market even on declines.

On the options front, maximum Put was seen at 9900 followed by 10000 strikes while maximum Call OI is at 10200 followed by 10100 strikes.

Fresh Put writing was seen at strike prices 9,950, 10,000 and 10,100 strikes while Call writing was seen at 10,100, 10,150 and 10,200 strikes.

“Intact Call and Put writing is keeping the range bound market move as it got stuck near to its life time high zones. The Nifty index formed an inside bar and a spinning top candle on the daily chart,” Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“Nifty again failed to surpass its life time high of 10,137 zones and traded inside the trading range of last sessions. Trend of the market is intact to positive but if it sustains below 10,050 then only a profit booking could be seen towards 10,000-9,980 zones,” he said.

Taparia further added that in case we see a breakout above 10138, the rally could commence the next leg of rally towards 10,200 levels.